Wednesday, March 1, 2017

For those who live in the world of
risk adjustment there has been a great debate among industry leaders in regards
to the use of blind coding in retrospective audits. For those unfamiliar with
the term, “blind coding,” it refers to coding and auditing medical records
without access to the original claims data. These audits are typically
performed by coding vendors hired by health plans to look for “missed” diagnosis
codes.

Since, first posing the question, “Could
retrospective chart reviews be considered Medicare Fraud?” in a June 2013 blogpost,
I have been an outspoken opponent of retrospective practices and have worked to
promote prospective practices and frontline education.

Whether you agree or disagree with my
views, everyone in risk adjustment should be paying very close attention to the
upcoming trial set for July 24, 2017 in the Graves
vs Plaza Medical Centers case.

Dr. Graves also contends that Humana “turned
a blind eye” to the fraud and did nothing to correct the problem after repeated
internal audits showed high error rates. She further contends that none of
their “risk adjustment data validation” processes were designed to detect fraud,
but instead to capture additional codes for the sole purpose of increasing
capitation payments.

On January 17th the court
denied summary judgement and found material issues of fact relating to
compliance activities, certification of risk adjustment data and the retention
of overpayments.

Key Points from the Court’s Report and Recommendation

§The undersigned finds that evidence in the record that raises
genuine issues of material fact as to whether the shortcomings of the design
and application of Humana’s compliance program met the CMS regulations or
constituted reckless disregard.

§The relator argues that “ample evidence supporting scienter falls
into two primary categories: (1) Humana’s failure to make ‘good faith efforts’
to certify the accuracy of its data submissions and maintain an ‘effective compliance
program’ as required by law; and (2) the red flags that Humana ignored at the
time and continues to ignore in its Motion.”

§The relator argues that neither of Humana’s two forms of oversight
related to the submission of risk adjustment data—the Medicare Risk Adjustment
(“MRA”) Review and Provider Data Validation (“PDV”) Review—were designed to
detect fraud or upcoding, and were therefore incapable of satisfying Humana’s
obligations to make “good faith efforts” to certify the accuracy of the data to
which it was attesting and maintain an “effective compliance program.”

§The relator argues that Humana’s MRA Reviews did not detect
International Classification of Diseases 9 codes (“ICD9 codes”) that were
unsupported or likely to be unsupported by the medical record, but instead were
designed to identify diagnostic codes for submission to CMS that providers may
have overlooked.

§The relator argues further that such one-way reviews are compelling
evidence from which a reasonable jury could conclude that Humana did not make
“good faith efforts” to certify the accuracy of its risk adjustment data and
did not have an “effective compliance system.”

§The relator offers evidence that the MRA Review was designed to
identify diagnostic codes for submission to CMS that providers may have overlooked.
Using algorithms to identify specific patients with potentially unreported
conditions, the relator argues that the goal of Humana’s MRA reviews was to increase
the capitated payment received by Humana and its providers

§Rather than reviewing a patient’s lab tests, specialist reports,
and underlying medical records, Humana’s PDV reviewers relied solely on a
physician’s progress notes to confirm diagnosis; for chronic conditions, they
validated the condition so long as its corresponding ICD-9 code appeared in the
progress notes, even if those notes did
not identify any confirming evidence or treatment plans for the diagnosed
condition.

§The evidence in the record raises genuine issues of material fact
as to whether the false submissions that Humana made to CMS based on Plaza
Medical Centers and Dr. Cavanaugh constituted
reckless disregard under the FCA.

§Humana contends that “effective” and “good faith” are ambiguous
terms and that the relator fails to cite any CMS guidance regarding their
definitions let alone warn Humana away from its interpretation of the governing
regulations.

§The relator relies on the CMS regulations found in 42 C.F.R. §
422.504(l)(2) and 42 C.F.R. § 422.503(b)(4)(vi)) that respectively require an
MAO like Humana 1) make good faith efforts to certify the accuracy of its data
submissions, and 2) maintain an effective compliance program. Additionally, the relator relies on the Ninth
Circuit’s Swoben decision that rejected the defendant’s arguments that the CMS regulations
were ambiguous and that the defendant’s interpretation was objectively reasonable
due to CMS’ clear, authoritative guidance that requires MAOs “to undertake ‘due
diligence’ to ensure the accuracy, completeness and truthfulness of encounter
data submitted to CMS.” Swoben, 832 F.3d at 1099 (citing Fidelity Fed. Sav.
& Loan Ass’n v. de la Cuesta, 458 U.S. 141, 158 (1982)) “[A]mbiguity alone
[does] not shield claimants from FCA liability.”

§CMS regulations obligated Humana to exercise “due diligence” and
“good faith efforts” to certify the accuracy, completeness, and truthfulness of
encounter data that Humana submitted to CMS.
The CMS requires that MAOs must implement a compliance program that
detects and prevents fraud, waste and abuse.
The relator’s evidence presents a fact question as to whether Humana
satisfied its CMS obligations or not which goes to the issue of whether Humana
recklessly disregarded the falsity of the claims it submitted on behalf of its
providers, Plaza Medical Centers and Dr. Cavanaugh.

§Humana contends that “absent evidence that Humana was on notice of
alleged fraud, allegations that Humana did not precisely follow its own
compliance program—the existence of which negates a finding of the requisite
scienter—do not establish the knowing submission or certification of allegedly
false diagnosis codes in violation of the FCA.” Motion at 23. The relator argues that if Humana’s position
was true, the defendants could always avoid FCA liability simply by
implementing a “compliance program,” no matter how ineffectual. The relator’s expert avers that “[a]lthough
minor lapses in policy may be excused, the record evidence here indicates
systematic failure to adhere to internal policies, rendering these policies
entirely ineffective as … fraud detection measures.” Anderson Declaration at ¶
140 (DE# 663-1).

§The relator relies upon the Ninth Circuit’s decision in United
States ex rel. Swoben v. United Healthcare Ins. Co., 832 F.3d 1084, 1098-99
(9th Cir. 2016), amended F.3d, 2016 WL 7378731 (9th Cir. December 16,
2016), which held that the CMS guidance is (a) “authoritative” because “it
provided clear guidance to [MAOs] … regarding their obligations under [42
C.F.R.] § 422.504(l);” (b) created an affirmative obligation to “undertake ‘due
diligence’ to ensure the accuracy, completeness, and truthfulness of encounter
data [i.e. risk adjustment data] submitted to [CMS];” and (c) imposed an affirmative
obligation to make “good faith efforts to certify the accuracy, completeness and
truthfulness of encounter data submitted.” Id. (citing 65 Fed. Reg. 40,248
(guidance preamble) (emphasis in original)).
MAOs are also required to “implement an effective compliance program,
which must include measures that … prevent, detect, and correct fraud, waste,
and abuse.” 42 C.F.R. § 422.503(b)(4)(vi).
In Swoben, the Ninth Circuit vacated and reversed the district court’s
dismissal of Swoben’s third amended complaint without leave to amend. The
Ninth Circuit found that Swoben’s theory – “that the defendants designed their
retrospective review procedures to not reveal unsupported diagnosis codes,
allegedly for no other reason than to avoid reporting that information to the
government-- states a cognizable legal theory under the False Claims Act.”

§The undersigned finds that the record evidence presents genuine
issues of material fact for a jury to determine whether the relator can prove
that Humana had the requisite scienter, that is “reckless disregard,” for FCA
liability and whether Humana failed to undertake measures constituting a “good
faith effort” to certify the truth and accuracy of its submissions to CMS and
to maintain an effective compliance plan to detect and correct fraud. Because there is sufficient evidence in the
record upon which a reasonable jury could find for the non-moving party, the
relator, this Court should deny Humana’s motion for summary judgment.

§The reverse false claims provision imposes liability on anyone who
“knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government.”

§The Patient Protection and Affordable Care Act of 2010 (“ACA”)
requires a person who receives an overpayment of Medicare or Medicaid funds to
report and return the overpayment within 60 days of the date on which the
overpayment was identified.

§“[T]he sixty day clock begins ticking when the provider is put on
notice of a potential overpayment,
rather than the moment when an overpayment is conclusively ascertained, which
is compatible with the legislative history of the FCA and the FERA.”

§The 2014 CMS regulation implementing the 60-day provision of the
ACA provides that an MAO “has identified an overpayment when [the entity] has
determined, or should have determined through the exercise of reasonable
diligence, that [it] has received an overpayment.”

§“[R]easonable diligence” includes “proactive compliance activities
… to monitor for receipt of payments.”

§The relator acknowledges, as the United States did in its Amicus
Brief (Dkt No. 68) in United States ex rel. Swoben v. United States Healthcare
Insurance Co., No. 13-56746 (9th Cir. 2016), that “[a]lthough some of the conduct
alleged here predates the enactment of the [ACA] and all of the conduct predates
the promulgation of CMS’s implementing regulation, these statutory and regulatory
overpayment provisions are instructive as to what Congress intended in enacting
the reverse-false-claims provision.”

§Humana disputes that it had knowledge of overpayments and/or
knowingly failed to return them within 60 days from when they were
identified. Humana contends that its
“voluntary cooperation with DOJ’s investigation of Relator’s allegations
precludes a finding that Humana ‘knowingly concealed’ or ‘knowingly and improperly
avoided’ the return of alleged overpayments.”

§The relator contends that the evidence in the record presents a
fact question as to whether Humana recklessly disregarded or deliberately
ignored overpayments as early as 2010, that is before the complaint was
unsealed, and improperly retained those funds until 2016.

§The relator relies on Humana’s November 2010 PDV Review of Plaza
Medical Centers which determined that 35% of the 178 audited diagnostic codes,
all of which were previously submitted to CMS, were invalid. The relator argues
that this audit alone revealed that Humana had received overpayment for some,
if not all, of the 63 invalid diagnostic codes that Humana identified during
the November 2010 audit. Humana waited
until February 2016 to submit code deletions for nearly all of those
invalidated codes, rather than calculating the resulting overpayments and
returning the funds to CMS as it was required to do to avoid liability under 31
U.S.C. § 3729(a)(1)(G).

§The evidence in the record presents a fact question for a
reasonable jury to determine whether Humana had knowledge of and knowingly
retained overpayments for improper diagnostic codes that were submitted to
CMS. The relator contends that Humana’s
MRA Reviews were similar to the one-sided reviews in Swoben that in practice
only captured under-reporting errors that would identify additional diagnosis codes
and lead to an increase in payments from CMS.
In Swoben, the Ninth Circuit explained that when an MAO designs reviews
that either avoid or conceal over-reporting errors, a lack of diligence and an
absence of good faith exist. Swoben,
2016 WL 7378731, at *10.

§Humana contends that its cooperation with the Department of
Justice’s (“DOJ”) investigation of relator’s allegations absolves it from
reverse false claim liability. Humana maintains that its lack of independent
investigation into Plaza Medical Centers and Dr. Cavanaugh was justified
because: 1) the government declined to intervene;
and 2) neither CMS nor DOJ told Humana to investigate its overpayments.

§The relator argues that Humana’s duty to investigate is independent
of the DOJ’s investigation. See Crumb,
2016 WL 4480690, at *16 (denying defendants’ motion to dismiss in part because
“even in 2014, when [defendants] knew the Government was conducting FCA
investigations into [defendants’] alleged false claims … defendants ‘failed to
take any corrective or repayment action’” and, by 2015, had only made partial payments).

§The undersigned finds that genuine issues of material fact exist as
to whether Humana is alternatively liable for its knowledge of overpayments and
its failure to return the overpayments to the government.